(TheNewswire)
HOUSTON, TX, USA – TheNewswire - MAY 28, 2021 – Select Sands Corp. (“Select Sands” or the“Company”) (TSXV:SNS ) ( OTC:SLSDF) announces operational andfinancial results for Q1 2021, and the filing of its audited financialstatements and associated management’s discussion and analysis on www.sedar.com . All dollar references in this release are in U.S.dollars.
KEY HIGHLIGHTS
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- Sold 59,970 tons of frac andindustrial sand during Q1 2021, compared to53,009 tons in Q4 2020 and 58,842 tons in Q1 2020. Sales volumes for Q1 2021 wereimpacted by a widespread harsh winter storm in February, during whichSelect Sands was informed by its natural gas supplier to curtail usageof gas to preserve supply for regional subsistence demand and toexpect the possibility of supply curtailment orders. The combinedimpact of well-head freeze-offs and the failure of gas processingplants and pipelines resulted in more than a week of downtime for theCompany’s Arkansas production facilities.
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- Generated revenue of $3.6 million and a gross loss of$0.04 million in Q1 2021, versus $3.1 million of revenue and a grossmargin of $1.0 million in Q4 2020, and revenue of $3.6 million and agross loss of $0.8 million in Q1 2020. Contributing to the $1.0million decline in gross margin from Q4 2020 to Q1 2021 were certainadjustments recorded in Q4 2020 for the Employee Retention Creditprogram (ERC) that was granted by the U.S. government,reclassification of year-to-date lease expenses out of cost of goodssold, and other costs associated with the Company’s project tooptimize and consolidate processing assets to improve its coststructure (the “Plant Reconfiguration Project”). Also impactingsequential results was higher expenses for utilities and repairs andmaintenance, as well as costs to restart the Company’s facilities asa result of the severe winter storm in Q1 2021.
- Reported a net loss of$0.8 million, or $0.01 loss per diluted share, in Q1 2021, compared tonet income of $0.4 million, or $0.00 per diluted share, in Q4 2020 anda net loss of $1.5 million, or $0.02 loss per diluted share, in Q12020.
- Posted an adjusted EBITDA (1) loss of $0.3million for Q1 2021, versus adjusted EBITDA of $0.8 million in Q4 2020and an adjusted EBITDA loss of $1.1 million in Q1 2020.
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- As of March 31, 2021, cash and cash equivalents were$0.2 million, accounts receivable was $1.6 million, and inventory was$3.5 million.
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(1) Adjusted EBITDA is anon-IFRS financial measure and is described and reconciled to net lossin the table under “Non-IFRS Financial Measures”.
Zig Vitols, President and Chief Executive Officer,commented, “We were encouraged to see our frac and industrial sandsales volumes for the first quarter increase 13% from the fourthquarter. Our sales volumes growth would have been even higher if notfor the more than a week’s worth of plant downtime due to the severewinter storm in the first quarter. The storm resulted in higherutility costs, repairs and maintenance, and other expenses associatedwith restarting our operations. Also impacting our sequentialfinancial performance were a number of cost adjustments made duringthe fourth quarter that significantly benefitted that period’sresults. Looking at our ongoing expense profile, we are clearly seeingthe advantages afforded by the Plant Reconfiguration Project. Welook forward to seeing even higher margins as production volumesincrease over time, which will allow us to spread our fixed costs overa larger number of tons.”
FINANCIAL SUMMARY
The following table includes summarized financialresults for the three months ended March 31, 2021, December 31, 2020,and March 31, 2020:
For Q2 2021, the Company currently expects salesvolumes of frac and industrial sand of 70,000 to 8 5,000 tons.
OPERATIONS UPDATE
Fully completed in January 2021, the PlantReconfiguration Project has materially improved the efficiency ofSelect Sands’ mining, processing and shipping operations by reducingthe number of interplant sites from four to two and allowing for alltruck transport between facilities in open top dump trailers whilediscontinuing the necessity of interplant transport in closed hoppertrailers. In addition, the Company has increased the level of its owntruck fleet capacity to help lower transportation costs.
Since the completion of the reconfiguration project inArkansas, the mine gate unit production cost has significantly beenreduced. On a cash basis, averaging Q4 2020 and Q1 2021 versus Q1 of2020 (before reconfiguration), the unit cost has been reducedapproximately 20% on a per ton basis.
Select Sands new wet plant located at the SandtownQuarry remains fully operational and the new dry plant at the DiazRail Facility is currently producing both 100 mesh and 40/70 meshproduct as needed.
Supporting the increasing needs of customers in theEagle Ford shale basin in South Texas, the Company’s George Westtransload facility is continuing to operate 24 hours per day and sevendays per week and is offered to transload for other rail shippers.
The Eagle Ford basin continues its recovery thatstarted in Q4 of 2020 according to Lium LLC as reported by industrypublication Infill Thinking in its May 4, 2020 issue. The Company isseeing other oilfield services companies planning to increase theirpresence in the basin.
Encouraging news from Research and Markets thatrepresents itself as the “World’s Largest market Store” recentlyreported that the global proppant market is forecast to grow to USD11,837.91 Million in 2025 at a CAGR of 9.2% from USD 7,612.38 Millionin 2020.
Despite increased oil prices, frac sand pricing hasbeen slow to recover and is not sustainable at these levels. Salesare coming in from a wider customer base as volumes from the Arkansasoperations remain under 50% capacity, while demand continues toincrease giving ample space to increase future shipments. Spot salespricing appears to have increased recently and the Company iscautiously optimistic that this will represent an opportunity for theremainder of the year.
OUTLOOK
Mr. Vitols concluded, “Driven by further economicexpansion and resulting growing global oil demand, we expect to see amoderate but steady increase in sales volumes as we move through theremainder of the year and into 2022. Although this is not assured. In addition to serving our largest customer with an active wellprogram underway in the Eagle Ford, we have been pleased to see someof our previous customers in other basins return to ordering product. With our high-quality product offering located much closer to keyoil basins in the Southern U.S. compared to the majority of otherNorthern White Sand producers, we believe we are uniquely positionedto serve both current and prospective customers, as well as capitalizeon other attractive market opportunities for the benefit of ourshareholders.”
Elliott A. Mallard, PG of Kleinfelder is thequalified person as per the NI-43-101 and has reviewed and approvedthe technical contents of this news release.
ADDITIONAL MANAGEMENT COMMENTARY
An audio recording of management’s additionalcomments related to its results and outlook will be posted to theCompany’s website ( https://www.selectsands.com/ ) under the Investors section on Friday, May 28, 2021.
Select Sands Corporationis an industrial silica product company, which wholly owns a Tier-1(Northern White), silica sands property and related productionfacilities located near Sandtown, Arkansas. Select Sands’ goal is to become a key supplier of premium industrialsilica sand and frac sand to North American markets. Select Sands’Arkansas properties have a significant logistical advantage of beingsignificantly closer to oil and gas markets located in Oklahoma,Texas, Louisiana, and New Mexico than sources of similar sands fromthe Wisconsin area. Select Sands also operates a transload facility inGeorge West, Texas in Live Oak County that serves customers operatingin the Eagle Ford Shale Basin. The facility has a capacity for 180rail cars and is equipped with two offload/loading stations withdedicated silos for a high throughput capacity.
The Tier-1 referenceabove is a classification of frac sand developed by PropTester, Inc.,an independent laboratory specializing in the research and testing ofproducts utilized in hydraulic fracturing and cement operations,following ISO 13503-2:2006/API RP19C:2008 standards. Select Sands’Sandtown project has NI 43-101 compliant Indicated Mineral Resourcesof 42.0MM tons (TetraTech Report; February, 2016). The Sandtowndeposit is considered Northern White finer-grade sand deposits of40-70 Mesh and 100 Mesh.
This news release includes forward-looking informationand statements, which may include, but are not limited to, informationand statements regarding or inferring the future business, operations,financial performance, prospects, and other plans, intentions,expectations, estimates, and beliefs of the Company. Information andstatements which are not purely historical fact are forward-lookingstatements. The forward-looking statements in this press releaserelate to comments that include, but are not limited to, statementsrelated to expected current and future state of operations, salesvolumes for 2021, the impact of the February 2021 winter storm and theunique market position of the Company. Forward-looking information andstatements involve and are subject to assumptions and known andunknown risks, uncertainties, and other factors which may cause actualevents, results, performance, or achievements of the Company to bematerially different from future events, results, performance, andachievements expressed or implied by forward-looking information andstatements herein. Although the Company believes that anyforward-looking information and statements herein are reasonable, inlight of the use of assumptions and the significant risks anduncertainties inherent in such information and statements, there canbe no assurance that any such forward-looking information andstatements will prove to be accurate, and accordingly readers areadvised to rely on their own evaluation of such risks anduncertainties and should not place undue reliance upon suchforward-looking information and statements. Any forward-lookinginformation and statements herein are made as of the date hereof, andexcept as required by applicable laws, the Company assumes noobligation and disclaims any intention to update or revise anyforward-looking information and statements herein or to update thereasons that actual events or results could or do differ from thoseprojected in any forward-looking information and statements herein,whether as a result of new information, future events or results, orotherwise, except as required by applicable laws.
COMPANY CONTACT
Please visit www.selectsandscorp.com or call:
Zigurds Vitols, President & CEO
Phone: (844) 806-7313
INVESTOR RELATIONS CONTACT
Wes Harris, Partner
Al Petrie Advisors
Phone: (281) 740-1334
Neither TSXVenture Exchange nor its Regulation Services Provider (as that term isdefined in the policies of the TSX Venture Exchange) acceptsresponsibility for the adequacy or accuracy of this release.
NON-IFRS FINANCIAL MEASURES
The following information is included for convenience only. Generally,a non-IFRS financial measure is a numerical measure of a company’sperformance, cash flows or financial position that either excludes orincludes amounts that are not normally excluded or included in themost directly comparable measure calculated and presented inaccordance with IFRS. Adjusted EBITDA is not a measure of financialperformance (nor does it have a standardized meanings) under IFRS. Inevaluating non-IFRS financial measures, investors should consider thatthe methodology applied in calculating such measures may differ amongcompanies and analysts.
The Company uses both IFRS and certain non-IFRS measures to assessoperational performance and as a component of employee remuneration.Management believes certain non-IFRS measures provide usefulsupplemental information to investors in order that they may evaluateSelect Sands' financial performance using the same measures asmanagement. Management believes that, as a result, the investor isafforded greater transparency in assessing the financial performanceof the Company. These non-IFRS financial measures should not beconsidered as a substitute for, nor superior to, measures of financialperformance prepared in accordance with IFRS.
As reflected in the above table for the periodspresented, the Company defines EBITDA as net loss before depreciationand depletion, interest on long-term debt, non-cash share-basedcompensation, deferred income tax expense (recovery) and income taxes.The Company defines Adjusted EBITDA as net loss before depreciationand depletion, interest on long-term debt, non-cash share-basedcompensation, deferred income tax expense (recovery), income taxes,gain on extinguishment of debt, gain on return of capital from equityinvestee, unrealized loss on investments, share of loss of equityinvestee, provision for impairment of property, plant and equipment,and loss on sale of property, plant and equipment. Select Sands usesAdjusted EBITDA as a supplemental financial measure of its operationalperformance. Management believes Adjusted EBITDA to be an importantmeasure as they exclude the effects of items that primarily reflectthe impact of long-term investment and financing decisions, ratherthan the performance of the Company’s day-to-day operations. As compared to net income (loss) according toIFRS, this measure is limited in that it does not reflect the periodiccosts of certain capitalized tangible and intangible assets used ingenerating revenues in the Company's business, the charges associatedwith impairments, termination costs, transaction costs or other itemsmanagement views as unusual or one-time in nature. Managementevaluates such items through other financial measures such as capitalexpenditures and cash flow provided by operating activities. TheCompany believes that these measurements are useful to measure acompany’s ability to service debt and to meet other paymentobligations or as a valuation measurement.
INDICATED RESOURCES DISCLOSURE
The Company advises thatthe production decision on the Sandtown deposit (the Company’scurrent “Sand Operations”) was not based on a Feasibility Study ofmineral reserves, demonstrating economic and technical viability, and,as a result, there may be an increased uncertainty of achieving anylevel of recovery of minerals or the cost of such recovery, includingincreased risks associated with developing a commercially mineabledeposit. Historically, such projects have a much higher risk ofeconomic and technical failure. There is no guarantee that productionwill occur as anticipated or that anticipated production costs will beachieved.
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